• by Gavin O'Malley  @mp_gavin, May 4, 2011

Largely due to lower revenue and restructuring costs, AOL on Wednesday said first-quarter profits plunged 86%.  

Always looking on the bright side, CEO Tim Armstrong said: "Today represents an important milestone in the turnaround of AOL as global display revenue grew for the first time since the fourth quarter of 2007."

Global display revenue grew 4% in the first quarter of the year, while domestic display grew 11% -- or 6% excluding acquisitions.

Year-over-year, AOL reported a profit of $4.7 million, or 4 cents a share, down from $34.7 million, or 32 cents a share. The company blamed reduced earnings on restructuring charges, stock-based compensation and charges related to recent acquisitions -- the most significant of which was its agreement to buy Huffington Post for $315 million.

According to AOL: "Advertising revenue was essentially flat after excluding the $41.8 million impact of AOL's 2010 initiatives to optimize its product offerings."

Search and contextual revenue declines of $17.3 million included $12.3 million related to fewer domestic queries, due to lower search traffic on AOL properties and a 22% year-over-year decrease in domestic AOL-brand access subscribers, as well as a $7.1 million impact resulting from fewer international queries.

Domestic display revenue grew $7 million, reflecting improved pricing and a higher sell-through rate, according to AOL -- particularly in the telecom, personal finance and auto categories.

Domestic display revenue in the quarter included approximately $5.2 million in revenue primarily related to the acquisition of Huffington Post.

Meanwhile, third-party network revenue increased $5.3 million, primarily as a result of the acquisitions of 5min Media and goviral A/S.

Showing further signs of hope, AOL's StyleList property moved into first position in comScore's style, beauty, and fashion category in March, while Patch grew users rapidly year-over-year and sequentially, according to comScore.

Also of note, during the quarter, AOL said most of its Web properties were redesigned to accommodate its new Project Devil ad format.

Going forward, Armstrong said, "we remain focused on accelerating our momentum through continued execution of our strategy to become the premiere digital content company."